Video Game Downloads Harming The Used Video Game Market?

from the well,-that's-a-flip dept

We've had a bunch of articles in the last couple years about video game execs complaining about the used video game market, saying that they deserve a cut of any such sale -- or that the used market should be banned altogether. This, of course, is short-sighted, as studies have shown that a healthy secondary market improves the primary market by adding value to the product (i.e., people may be more willing to buy the new product, knowing they'll be able to resell it later). And, of course, the market has a way of dealing with these things.

So, it's a bit amusing to now see sort of the flip side to that story (sent in by the amusingly named "Just Another Moron in a Hurry") -- with some warning that the rise in direct downloads of video games is threatening the used video game market, and that may be bad for consumers as well. Obviously, those games can't be resold (at least not easily), and thus there isn't a cheap price entry point for consumers, as there is with used packages games. Again, even though this is complaining from the other side, I'm not sure it's really that big of a deal either, as the market again should start to deal with this situation. Being able to offer games direct to consumers should lower video game production costs (no more packaging/shipping/logistics/hard goods/etc.) and, even they don't initially, eventually the prices should reflect that, as well.

right of first sale

video game downloads being prevented from being transfered (lots of games have policies against it and will ban if a foreign IP shows up or you try to sell on ebay) has been trumping first sale bigtime. With blizzard linking all your accounts together now you have to sell them all or none, you can't really split it off anymore.

So there is more to this than you may think, Mike.

There has been a huge impact on resale. Look at all the MMO's and find a single one that allows transfers without actually costing the original owner a fee; it doesn't exist for a mainstream game. You can ebay all the acounts, etc for sale, but assuming those are legit is another story altogether.

Being able to offer games direct to consumers should lower video game production costs (no more packaging/shipping/logistics/hard goods/etc.) and, even they don't initially, eventually the prices should reflect that, as well.

You mean like how the prices of music downloads reflect the fact that there is no packaging/shipping/etc costs?

Or like how the price of CDs dropped dramatically once the manufacturing plants were up to speed and the initial costs had been made back?

Scary part about well-done DRM

Personally, I have been buying games for years almost exclusivly through Steam. Steam has its own kind of DRM, (in addition to what the publishers themselves have) although its not "DRM" per se. You simply have to sign in. Games are tied to your account. While this makes it easy to transfer your personal game to any machine that you use, you are subject to what Steam allows you to do with your game. This includes the inability to resell any of your legally purchased games.
Steam makes it incredibly easy to buy new games. I can (and have) bought games on a whim that took 1 minute for the purchase and about 2 hours to download, all without leaving my chair. Their massive collection of games, great community, and constant deals that makes it a juggernaut of video game distribution that completely negates any resell of an individual game.

A Steam gift purchase is a one-time transfer - after the recipient has activated and installed the game, it is a non-refundable game in his or her Steam games collection. Also note that you may only gift new purchases - you may not transfer games you already own. That'd be like wrapping up and presenting the toaster you've used every morning for the past year.

The scary part is: Steam has done so much right that people will continue to use it (like me), which will push the industry in the direction of no second sales. In this case, the market forces are actually moving against second sales because Steam's model is so successful.

P.S. Steam: If my friend doesn't have a toaster, a used one is still a valuable gift ... you asses.

App store cage

This is part of why trends like App stores (especially walled gardens like Apple's) and the PSP Go trouble me. What you have now are hardware platforms that are trying to be engines for consumption, with a new form of consumption that can't be resold or shared, even though what is being "consumed" is both non-volatile and never diminished by use. Some of these products, like the MMO accounts mentioned, might even be considered enhanced with use and thus worth *more* at resell -- or at least they would be in a free and fair market.

I don't think these types of services should be allowed to tell you that you are "buying" anything, because if you don't have resell rights then you don't really "own" anything at the end of the transaction. What you have is a subscription with more complicated terms. At best you have a rental, not a purchase. Valve's Steam service treats their subscribers admirably given the current problems with the market field, but they still don't treat them with the basic respect other more traditional retailers do: they don't admit the truth that their customers are all subscribers, and never owners.

All purveyors of DRMed products that say you can "buy" anything from them should be held liable for false advertising at least. I think it would be more just and honest to call it fraud, and prosecute them all accordingly.

Re: App store cage

Well, you can "buy" or "purchase" a license. Services like Steam make you agree to a fairly explicit license agreement which, in case you weren't clear, makes it very obvious that you're not obtaining any sort of ownership in the game programs themselves.

Of course, many will argue that click-through EULAs like this aren't valid, that many people are fooled because their two-year-old children end up clicking "agree" and they never find out about the agreement, and so on. Worse, some digital products (music on CD or movies on DVDs, for example) include no such license agreement, and yet they are also licensed.

The license/purchase dichotomy is a funny thing. We make purchases all the time that are actually somewhat complicated arrangements without any formal agreement. Every time I get a Coke at Taco Bell, I've entered into a very weird implicit agreement with them. I don't get a soda, I get an empty cup which I can fill as many times as I want at the self-serve fountain, but if I leave I can no longer return and fill up the cup. I can, however, go outside to my car and grab something, come right back in, and get a refill. So there's some extant but ill-defined grace period in which I can leave and still get a refill. I also cannot bring in my own cup and get refills, I have to buy one of theirs, even though my cup is just as good - this is a form of SRM (Soda Rights Management). I can give or sell my tacos to the next guy coming in the door, but I can't give or sell my cup to the same guy so he can get refills. Clearly, Taco Bell is interfering with my right of first sale. Nonetheless, I have never signed, read, or clicked-through any sort of agreement with Taco Bell outlining this arrangement.

How do you think we should deal with licensing things in a way that seems "fair" to you? If people agree to license agreements they haven't read, and then argue they aren't valid anyway, how are you supposed to license something to someone?

Full Ack!

I know I won't

"Steam has done so much right that people will continue to use it (like me)"

Or they don't, like me. During a buddy's holiday he lend me his computer so I could play through Half-Life 2 logged in to his Steam account. I had bought HL + Opposing Force before but as with the upcoming Starcraft 2 (no LAN!) I don't see any reason why I'm required to have an internet connection just to play a game.

The only problem is...

Re: Re: right of first sale

I think you completely missed what I was talking about.

I was talking about legal downloads too. They are equivalent to DRM in their own way, and trump first sale as mentioned. It's been this way since the days of nintendo though, for people who don't know about wonderswan/other compatibles.

The old days...

It used to be that you could buy a game, beat it, and sell it back to the store towards other games.

Now, since everything has DRM, online registration, 1-use CD keys, and whatever other garbage they try to put on it, you're stuck with whatever game you buy with ZERO resale value.

With Pirate Bay in the crapper, I now purchase FEWER legitimate games because I can no longer try them out before I buy them (unless a friend buys it first and tells me it's decent).

Downloading content (like with Steam) is convenient. I've not purchased a game at an actual store (or purchased anything at an actual store, really, other than food) for a long time. The benefit? Not having to change CDs every time you want to play a different game.

Re: Re: App store cage

I view it a different way:

They have liquid which requires a container to drink it. They provide that container for money. I purchase it.

If I had my own container, I'd use it. If they don't like it, tough. I'll go eat somewhere else then. It's like... 10 cents cost to them. If they estimate everyone having at least 1 refill (even though most people don't get one), then I'm not making a dent in their sales by having a soda. They're still making a greater profit margin than estimated.

This is a retailer complaint - not publisher

Mainly an EBGames/GameStop issue as without used box resale, they are finished. They hardly even stock new games (I dont think they do at all for PC) - they are totaly re-sale driven, without it, they are history.

I still buy used games. This is simply because that you can STILL get a lower price by buying used games at a store as opposed to downloading them off of the PlayStation Netowrk, XBox Live, or Nintendo's Virtual Console.

DRM kills used PC games. I wonder what the legal argument could be against a license agreement for music that isn't included. Can they actually hold you to an agreement you didn't agree to when you purchase music? Theoretically you could sell your music.

Re:

Well, a CD with about 8 or 9 songs can cost around $15. That same album is about half the price as a download. Prices did come down for music. Maybe not as much as we'd all like, but they did. You can get a song for 89 cents from Amazon. If other online music stores become successful, price wars will begin. Hell, if Amazon can polish up its store and offer even better competition to iTunes, there may well be price wars.

Re:

I'm fairly certain most online stores have various agreements you must agree to in order to purchase the music. If you're talking about re-selling digital copies of a CD you've purchased, well, thats already illegal, therefore no agreements are required.

So, theoretically, you can't resell music you've purchased (unless its the actual CD and we're all aware that you can resell those anyway).

Weee

Re:

or like how Taco Bell didn't bring back green onions after the salmonella scare died down. It drives me nuts that even as mfg and dist costs go down, prices frequently don't, but that's how the market works. Charge as much as people are willing to pay. I would do the same thing. I wouldn't expect the price of direct downloads to go down much.

If publishers move further away from hard goods and continue to restrict being able to transfer those downloaded products, they will effectively force purchases into a first sale only scenario. At that point they can keep charging as much as the consumer market will allow. What would suck about that is the only way to drive prices lower would be to stop buying games. I think the backlash of that would be a boom in illegal copies of games, more lobbying etc...

Controlled market = fixed prices

The one thing I've noticed, too (Xbox Live being my primary experience here), is that when you have this closed market controlled by a single company, you rarely see prices fluctuate or drop.

I've ranted about it in great big walls of text on my gaming blog, but the tl;dr version is: content that's been on the Xbox Marketplace since the day it launched is still at its original price, whereas disc-based games on the open market (for even far less time than those DLC items) are available at much lower prices. You get ridiculous situations where add-on content (expansions or map packs) end up costing five times what the game is actually worth.

Re:

Bingo. This is my problem with games going "all digital." If I can't resell it and recoup some of that cost, and the price is the same, what possible incentive do I have to buy the download version instead of a disk version?

And you know, as Rekrul pointed out, the game prices will not be dropped to reflect this change in distribution method and taking away the used game sale.

If Microsoft/Sony started selling 360/PS3 games as digital download in competition with brick and mortar stores, Gamestop and the like will have a huge hissy fit. Imagine, if you will, that Microsoft offers Madden 11 as a digital download for $40 while the disk version costs $60. Just imagine the fallout from the game stores. Honestly though... it kinda needs to happen.

Maybe the track they should be taking is to offer older games as a digital download at prices comparable to the used games. I can drive down to Gamestop and buy Just Cause for $10. Why not offer it up as a download for 800 Microsoft Points?

Re: Re: Re: right of first sale

Re: Scary part about well-done DRM

yeah man steam sucks. I only use it because to play certain games you just have to. Steam does have DRM they just don't label it as such. I like the easy of use but hate the fact that every time I try and play a game on steam I have to wait 20 mins for it to update.

Re: Re: App store cage

I'm a bit biased on this because I think all EULAs are worthless BS. They are usually the result of some lawyer in CYA mode rather than any consistently enforced standard or policy. Y

Your fast-food examples aren't really applicable here, because they only apply to a type of consumable that is destroyed or diminished with use. Hardware and software don't qualify in the same schema at all. Hardware can experience some small level of wear and aging from extended use, but arguments about that deal in warranty issues and not EULAs so much. Digits don't age. I guess you can try to eat your iPhone or PSP Go to make a point, but I'm not sure what that point would be -- a study of the effects of gastric acid on electronics, and subsequent warranty service?

In general, if any sense of "ownership" is entirely dependent on a "license", I don't think it really qualifies as ownership. They own it. You just lease, rent, or subscribe to it, which all amount to the same thing to me: non-ownership. It's even worse than those rent-to-own schemes, because they make even delayed-and-overpriced ownership impossible. It's just that simple. These DRM companies are the ones intentionally trying to obfuscate the reality of the transaction, and I think they should be held liable for their lack honesty.

Re: Scary part about well-done DRM

No, it's technically a magic toaster that stays as new and clean as the day you bought it forever and ever. So, the recipient would have no ability to even know that you had used it unless you told him. So, it's a straw man argument Valve uses to try and justify its (arguably) illegal actions in restricting the first sale doctrine.

Re:

For file-sharers who wouldn't buy anyway -> no impact
For file-sharers who try before they buy -> no impact

This doesn't mean there is no impact from file sharing, and I don't think Mike has said that, but shows it's not always negative.

As for games bought via download, it harms the used video game market because they can't be resold! It reduces the product availability in that market. No product to be sold, no market! It's a completely different question.

Short-sighted indeed

Video game execs are being short-sighted indeed. They should talk to a few car sales execs. They know that if a car has more potential resell value, people are more likely to buy.

However, the used video game market might cause some lost revenue in value priced old games.

I personally hope the used video game market thrives, precisely so direct download prices come down. It makes little sense for games to be sold on Steam, etc, at retail shop prices, precisely because of the cost savings involved. I like Steam, and have bought a few games there, but only old games or during promotions. New games are sold at 50€ just like in stores, and I can order them on amazon.co.uk or play.com saving 15-25€! It makes no sense to me to buy new games on Steam.